• April 29, 2024
• Uncategorized

Larry Joseph Michaels (CRD#: 4351477) is a registered Broker and Financial Advisor with Crown Capital Securities, L.P., in Orange, CA.

 

Broker’s Background

He entered the securities industry in 2001, and previously worked with Prudential Securities Incorporated; Pruco Securities Corporation; New England Securities; Crown Capital Securities, L.P.; J.P Turner & Company, LLC; and Legacy Advisory Group, Inc.

 

Allegations of Misconduct

According to publicly available records published by the Financial Industry Regulatory Authority (FINRA), in April 2024, without admitting or denying the findings, Michaels consented to the sanctions and to the entry of findings that he exercised discretion authority without prior written authorization from the customers.

 

From September 2020 to October 2020, Michaels exercised discretionary authority when

placing 51 trades in 17 non-discretionary brokerage accounts belonging to 14 customers

without having communicated with the customers prior to the execution on the dates of

the trades. Michaels did not have written authorization to exercise discretion in the 17

accounts. Moreover, Crown Capital did not accept any of the 17 customer accounts as

discretionary and the firm’s Written Supervisory Procedures prohibited the exercise of

discretionary authority in brokerage accounts.

 

The findings stated that Michaels’ member firm did not accept any of the customer accounts as discretionary and the firm’s WSPs prohibited the exercise of discretionary authority in brokerage accounts. The findings also stated that Michaels failed to notify his firm about the full nature of his participation in an OBA. Upon joining Crown Capital, Michaels disclosed his role as an owner of an accounting business (Accounting Company) and that he was engaged in providing income tax preparation and accounting services and Crown Capital approved Michaels’ outside business activity based on this disclosed role. However, since October 2018,  Michaels’ work for his company exceeded the scope of his disclosed role as he provided additional services to his company clients, some of which were his firms brokerage customers, including acting as a manager and/or consultant to assist his company clients in managing and growing their businesses. Additionally, Michaels acted as an incorporator and filed articles of incorporation for several businesses on behalf of his company clients, and was listed as a governor, who had the authority to make decisions on behalf of at least one company.

 

Respondent also consents to the imposition of the following sanctions:

• a two-month suspension from associating with any FINRA member in all

capacities and

• a $10,000 fine.

For a copy of Larry Michaels’ Disciplinary Action Details, click here.

 

In addition, Larry Michaels has been the subject of two other customer disputes, which include the following:

• December 2020—“ Customer alleges they were not aware of redemptions of mutual fund positions thus missed out on market gains.” The damage amount requested was $10,000 and the customer dispute settled for $24,300.
• September 2013—“ CLIENTS ALLEGE THAT SEVERAL REIT AND PARTNERSHIP INVESTMENTS WERE NOT PROPERLY SOLD TO THEM NOR WERE THEY SUITABLE.” The damage amount requested was $325,000 and the customer dispute settled for $200,000.

 

For a copy of Larry Michaels’ FINRA BrokerCheck, click here.

 

 

We Help Investors Recover Investment Losses

FINRA regulations require that a customer’s written authorization is required before a broker-dealer can carry out transactions in the customer’s account. In addition, the broker-dealer’s member firm needs to approve the broker-dealer’s authorization. These measures are intended to protect the customer. Discretionary trading allows the broker-dealer to unilaterally decide to buy or sell securities at any price and not have to check with the client first. Exercising discretion without authorization can be costly to investors, and broker-dealers and their member firms, too.

 

Pursuant to FINRA Rule 3270, outside business activities in which Financial Advisors become involved must be disclosed.  FINRA Rule 3280 prohibits Financial Advisors from engaging in Private Securities Transactions, which are securities transactions that take place away from the employing brokerage firm.  The purpose of these rules is to ensure that Financial Advisors do not engage in selling away.  The Financial Industry Regulatory Authority (FINRA) strictly prohibits financial advisors from “selling away” or selling securities and investments to clients that are not offered by the brokerage firm with which they are employed. For example, it is illegal and a violation of industry rules for a financial advisor to recommend or even suggest that a client invest in the financial advisor’s own business or a business operated by his or her friends or family. It is not necessary that the financial advisor earn any compensation for recommending an outside investment.

 

The purpose behind this prohibition is to ensure that a financial advisor only offers to sell securities that have been vetted by his or her employer brokerage firm through a rigorous due diligence process. Most brokerage firms have an approved list of investments, products, and research that can be provided or made available to clients. Any deviation by the financial advisor from the approved product list may constitute selling away.

 

Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.

 

Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.

 

Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.

 

Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s age, tax status, time horizon, liquidity needs, and risk tolerance; a client’s other investments, financial situation and needs, investment objectives, and any other information disclosed by the customer should also be considered.

 

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.